Under Section 194B of the Income Tax Act, TDS (Tax Deducted at Source) will be deducted if income is earned from winning lotteries, crossword puzzles, card games, quiz shows, online gaming or dance competitions. However, the winnings from such games must exceed Rs. 10,000.
If you have won a game, competition or a lottery, here’s what you must know about Section 194B – provisions of Section 194B, who deducts TDS, how to calculate the TDS amount and the penalty for not paying TDS. Read on!
As per Section 194B, a person responsible for paying winnings of lotteries, crossword puzzles and other similar games must deduct income tax before making the payment. This is applicable only when the winnings exceed Rs. 10,000.
Currently, a flat TDS (Tax Deducted at Source) of 30% is applicable on winnings over this limit. The total income tax charged becomes 31.2% after factoring in surcharge and cess. The company or organisation distributing prize money is responsible for deducting TDS.
There can be cases where the winnings are fully in kind or partly in kind and cash. If the cash balance is not sufficient to deduct TDS, the payer is responsible for withholding winnings till the payee pays him the equivalent amount in cash. Alternatively, the payee can pay applicable TDS and submit proof of payment to the payer.
The person paying the prize money to a person winning by means of a lottery, crossword puzzle, game shows, dance competitions, etc. is eligible to deduct TDS if the amount exceeds Rs. 10,000.
Persons paying winnings of lotteries, TV shows, and online games must collect the TDS amount at the time of payment and deposit it to the government. Given is a list of sources for which a flat tax rate of 31.2% is applicable:
If you have received a gift in kind, such as a flat or a car, you have to pay a 31.2% TDS before taking possession of the gift. However, in some cases, a company distributing such gifts may choose to take the TDS liability.
Income from game shows and lotteries is counted separately from the rest of your income for taxation purposes. Winnings from such sources fall under the head ‘Income from other sources.
Let’s say Mr. Yadav, has won Rs. 4,00,000 from a game show. His taxable income from salary is Rs. 7,00,000 after factoring in all tax deductions. TDS on his winnings will be Rs. 1,24,800 (31.2% of Rs. 4,00,000) while tax liability on the rest of his earnings will be as per the applicable tax slab rates.
If a person fails to make TDS payments under Section 194B he/she is punishable with imprisonment which will be a minimum of 3 months and can extend up to seven years along with fine.
Also Read: 5 Other Sources of Income You Must Pay Tax On: How To File ITR, Deductions And Exemptions
Section 194B of the Income Tax Act stipulates that any winnings above Rs. 10,000 from sources discussed above are subject to 30% TDS. After cess and surcharge, the effective rate becomes 31.2%. In case such earnings are not in cash, you will have to pay the TDS before you can receive your winnings.
Ans: While Section 194B deals with winnings from lotteries, crossword puzzles, card games, etc., Section 194BB deals only with winnings from a horse race. From 2020, flat 30% TDS plus surcharges are applicable on winnings above Rs. 10,000.
Ans: Winnings from a lottery have a flat 31.2% TDS applicable, including surcharge and cess under Section 194B. So, winnings of Rs. 1 crore will have Rs. 31.2 lakh TDS applicable u/s 194B (31.2% of Rs. 1,00,00,000).
Ans: No, the TDS paid for winnings from lotteries and game shows are non-refundable. Usually, taxpayers can claim a refund if the TDS deduction is more than their tax liability in an assessment year. That said, for lottery winnings, you cannot claim any refund.
Ans: No, if you have paid any bonus to commission to lottery agents or sellers of lottery tickets, you do not have to pay TDS on it. Taxes deducted u/s 19B will apply after deduction of such bonus and commission from your winnings.
Ans: For winnings in kind or gifts, you have to pay the applicable TDS before receiving such presents. If you win a car worth Rs. 10 lakh, you have to pay Rs. 3,12,000 (31.2% of Rs. 10,00,000) out of your own pocket.
Ans. The following types of payments are not eligible for TDS under Section 194B:
If a certain percentage has to be paid to the Government or to the lottery agent, then such amount will not be eligible for TDS
If an agent receives prize money on unsold tickets or unclaimed prize, then it becomes part of his business income which is not eligible for deduction under Section 194B
Payments made to lottery agents in form of commissions will be eligible for tax deduction under Section 194G and not 194B
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
Public Provident Fund (PPF) – Know PPF Details and Its Benefits
In 1968, the National Savings Institute introduced the PPF scheme. The Public Provident Fund (PPF) ... Read More »How to Withdraw PF Amount? – Step-by-Step Guide
EPF (Employees Provident Fund) is a popular savings scheme for employees in India. The Central Gove... Read More »Previous Year in Income Tax: Exceptions on Taxation
‘Previous Year’ in the Income Tax Act, 1961 is an important concept associated with the payment... Read More »What are Capital Receipts and What are its Types?
The concept of a receipt is easy to understand as it is described as a written record that a paymen... Read More »What is Anti-Dumping Duty (ADD) – Its Working, Examples and Calculation
Anti-dumping duty refers to a tax or other charges levied on a particular imported product. The con... Read More »Loan to Purchase Land – Types, Features, Eligibility and Documents Required
Loans for land purchase or plot loans are secured loans given for purchasing plots of land. Borrowe... Read More »List of 11 Tax-Free Income Sources in India (2023)
There are many sources through which a person can earn his/her income. It can be income from salary... Read More »New GST Rates in India (2023) – Latest Changes in GST Rates
GST or the Goods and Services Tax is one of the most significant tax reforms to be ushered in since... Read More »What is Input Tax Credit (ITC) in GST – Eligibility and Documents Required To Claim ITC
GST is consumption-based taxation levied at all stages in a value chain. Set-off of GST paid in the... Read More »What is Cess on Income Tax: Overview, Types and Calculation
Cess is a tax on taxes imposed by the Central Government or state governments for specific reasons.... Read More »Section 80EEB: Eligibility & Deduction Amount
Electric vehicles are better for the environment and an efficient alternative to fuel-run vehicles.... Read More »What is Section 80GGA: Deductions on Donations Made for Rural Development
Income Tax Act provides several opportunities for taxpayers to claim partial or full deductions. Se... Read More »Top 10 Chit Fund Schemes in India in 2023
Chit funds are one of the most popular return-generating saving schemes in India. It is a financial... Read More »10 Best Gold ETFs to Invest in India in February 2023
Gold ETFs or Gold Exchange Traded Funds are passively managed funds that track the price of physica... Read More »Top 10 Demat Accounts in India [Lowest Brokerage Charges]
A Demat account was created to eliminate the time-consuming and inconvenient procedure of purchasin... Read More »20 Best Index Funds in India to Invest in 2023 (Updated on 31st Jan)
What is an Index Fund? An index fund is a type of mutual fund or exchange-traded fund (ETF) that... Read More »Best Arbitrage Mutual Funds to Invest in India: Returns and Taxation
Arbitrage funds are hybrid mutual fund schemes that aim to make low-risk profits by buying and sell... Read More »Best SIP Mutual Funds To Invest In India (2023) – Its Types And Taxation
A Systematic Investment Plan (SIP) is a convenient way to invest a fixed sum in mutual funds. For i... Read More »10 Best Corporate Bond Funds in India 2023 – With Returns
Corporate bond funds are debt funds that invest at least 80% of the investment corpus in companies ... Read More »10 Best Banks for Savings Account in India (2023)
A savings account keeps your money safe, and lets you earn interest every quarter. There are many b... Read More »All information is subject to specific conditions | © 2023 Navi Technologies Ltd. All rights are reserved.
Start Small. Dream Big.
Start your Investment Journey with just ₹10